Real Estate Brokers and Commission Payments: The Basics

Posted By Rosenthal Law Group || 28-Jul-2016

Does a broker need a written brokerage agreement to claim its commission?

No written agreement is required in Florida for the enforcement of a commission
payment owed; a written agreement is required in order to impose a broker’s lien.

While a written agreement is not required in Florida, it is wise for parties
to enter into written brokerage agreement with their respective brokers
as soon as possible to avoid any unwarranted claims for commission payments.

When is a broker entitled to its commission and can a broker earn a commission
if the closing does not occur?

In Florida, a broker is entitled to a commission payment when that broker
procures a purchaser or tenant that is ready, willing and able to proceed
with the transaction. Because of the uncertainty concerning when a buyer
or tenant is ready, willing and able, parties should enter into a commission
agreement very early on. Whether and when a commission is owed is contingent
on the specific details of each transaction and the express language drafted
in the commission agreement.

A procuring broker is the procuring cause of a sale or lease of real estate,
when the procuring broker has: (1) brought the parties together;
and (2) effected the sale or lease assignment as a result of continuous negotiations
inaugurated by him or her.

To be the procuring cause, the broker must show that: (a) he brought the
property to the attention of the potential purchaser;
and (2) the sale was consummated through the continuous negoations between
the vendor and the purchaser.

Does Florida impose any statutory restrictions on commission rates?

Florida law does not restrict commission rates, the parties are free to
negotiate and determine the commission rate.

What is the range of negotiated rates?

Rates vary considerably by county based on market factors and case-by-case
conditions.

Who pays the commission – seller, landlord, or both?

Responsibility for payment of the commission varies by county dependent
on the particular market and the type of transaction.

The seller commonly pays the commission in the sale of commercial real
estate, though parties may negotiate that the payment is shared between
the purchase and seller, or that payment is to be made entirely by the
purchaser.

The landlord typically pays the commission for a commercial lease, though
this may be negotiated by the parties so that the payment is shared between
the tenant and the landlord. In a commercial lease situation, the commission
is usually paid over a period of time outlined in a schedule attached
to the commission agreement. For this reason, careful attention should
be paid to the terms of the written brokerage agreement to avoid disputes
over commissions.

Is fee splitting allowed?

Fee splitting is permitted in Florida; however, Florida limits the splitting
of a fee, commission or other compensation received by a real estate broker
to other Florida licensed real estate brokers.

Have more questions? The experienced Florida business litigation attorneys at
Rosenthal Law Group are ready to hear from you.
Call us today to
request a consultation.

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